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One year until the Brexit due date: What we know and don’t know

One year until the Brexit due date: What we know and don’t knowWith less than a year to go now until the UK officially leaves the EU, we explore how things stand for expatriates in Portugal under the proposed Brexit deal.

Residency: What we know

Although Brexit is scheduled for 29th March 2019, a 21-month transition period is lined up to maintain existing residency rules and benefits until the end of 2020.
Under the proposed citizens' rights agreement, Britons “lawfully residing” in an EU member state before the 31st December 2020 cut-off date will retain the right to remain and access existing benefits in that country after full Brexit takes effect.

Those who already hold permanent residency can convert their documentation for free, while others are promised a “transparent, smooth and streamlined” application process.

Agreed reunification rights mean existing partners and close family members can join settled residents in an EU country, even after Brexit.

However, residency rights expire if you are absent from the country for five continuous years or more.

Residency: What we don’t know

What counts as “lawfully residing” is unclear. Permanent residents will qualify, but expatriates living in a country for under five years may need to prove their settled status.
If you have not already, make sure you have registered with the local authorities and taken steps to secure any supporting paperwork. If you are still living in the UK but planning on relocating, consider doing so as soon as possible to maximise your time in the country before the Brexit date.

Note that the transition period is not yet guaranteed, so it is sensible to work towards the original Brexit cut-off of March 2019 rather than December 2020. In any case, the residency process takes time. The risk of being caught in an administrative backlog for residency applications increases as the deadline draws closer, so take action as soon as possible to avoid missing the cut-off date.

Beyond Brexit, we do not know how acquiring residency, visas and permits will work, but we can expect them to be much less straightforward than today.

A key unresolved issue is onward freedom of movement – whether you can automatically relocate to another EU country after Brexit. This especially affects those who work or wish to study across different member states. While the UK has offered “guaranteed rights of return” to EU citizens settled in the UK before Brexit, so far the EU27 has not agreed reciprocal rights for UK nationals.

Healthcare and pensions: What we know

The deal on the table preserves existing access to pensions and healthcare for residents legally settled in Portugal before Brexit. This means holders of the EU ‘Form S1’ can continue receiving free or reduced healthcare, and the European Health Insurance Card (EHIC) still provides cover when visiting other EU countries.

British expatriates remain eligible for annual increases in the State Pension, even if you have not started taking your pension before the Brexit cut-off date. As things stand, Brexit will not affect how you can withdraw or transfer UK pension funds.

Pensions: What we don’t know

Post-Brexit, the UK no longer has to abide by EU rules on freedom of movement for capital; this could lead to increased taxation of UK pension withdrawals and transfers.

Last year, the UK introduced a 25% tax on transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) located outside the EU/EEA. Some speculate that this could be extended to within the EU once the UK sheds its obligations to the bloc.

As such, there may be limited time to transfer without tax penalties. Make sure you take personalised, regulated advice before taking any action with your pensions.

Taxation: What we know

Each country sets their tax rules, not the EU, and tax treatment depends on whether you are resident, not your nationality. Brexit itself therefore has no effect on how Britons are taxed in Portugal. However, under current rules, some non-EU/EEA assets may be taxed differently.

For example, if you sell a Portuguese to reinvest in a new main home within the UK, you currently qualify for capital gains tax relief. Once the UK is outside the EU/EEA, however, the sale could attract capital gains taxes.

A financial planning review can ensure your wealth and assets are structured as tax-efficiently as possible and prepare you for any Brexit implications.

Taxation: What we don’t know

Tax rules are always subject to change, even without Brexit. The main threat here comes from the UK; as the government loses its EU commitments it gains more freedom to tax nationals living in Europe. As already mentioned, pensions could be a key target.

Another could be tax relief rules for expatriates. For example, in recent years the government has threatened to remove the personal income tax allowance from non-resident British nationals. Taking this away from expatriates post-Brexit could be a relatively easy way for the Treasury to boost revenue in the future.

While the proposed withdrawal agreement and transition period provide some reassurance for expatriates, the final deal is not signed. With only months of certainty left, make sure you do what you can now to secure your position in Portugal. A locally-based adviser can help you understand the cross-border implications and prepare appropriately for the post-Brexit world.

Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this article, which is general in nature and not specific to your circumstances. Tax information has been summarised; individuals are advised to seek personalised advice.

This article was written by Blevins Franks. Read Original Article Here